Managing your finance starts with getting a checking account which will act as a transactional focal point as you can easily track your income and expenditure. Checking accounts comes with basic features like debit card, online banking and chequebook. Some banks do offer additional features like overdraft and if you are maintaining your credit score well banks usually review accounts to provide finance benefits like personal loans as well. To get the best advantage of the available options careful analysis of a few factors must be done to select the checking account that best suits your needs.

Understanding Checking accounts

In United Kingdom checking accounts are commonly known as the current accounts which is simply an account where your salary is credited. These accounts provide debit cards to enable easy access to your money. This account may provide you with an overdraft facility depending upon the analysis of your credibility by the bank. Some banks may even charge you a fee for keeping a current account and in return you can get various benefits like rewards for spending using your debit card and even insurance offers in some cases.

Key Factors to Consider

 

Fees: Banks might charge you for monthly maintenance of your account, any overdraft facility that may choose, monthly charges for your debit card. Hence this has to be the first item in your checklist that you should be done with in the process of consideration for your checking account.

 

Interest Rates: We all want our money should earn some amount of interest if it is in our checking account. Hence it is important to choose the account giving better interest rate than the other options available.

 

Access to ATMs: A decent enough network of ATM machines is a factor that you cannot afford to miss. Banks with a decent network of ATMs give more accessibility to your money if cash is required for transaction.

Online and Mobile Banking: This is the feature that can make any bank stand out from its competitors as an efficient online banking system is bound to make customers attracted towards the bank’s services. If this efficient online banking service is combined with a responsive mobile banking service you have the bank of your dreams for your checking account.

 Branch Availability: In this modern age of banking, it depends whether you are an old school customer who likes to get to his bank’s nearest branch and get your issues resolves or you are a person who likes to call customer service for answers. If you are the former one you should select the bank with better network of physical branches near your house.

Customer Service: An efficient and effective customer service is clear indicator of any bank’s service quality. A responsive customer service distributed among various communications channels means your bank takes its customers seriously.

Types Of Checking Accounts

Basic Checking Accounts: As the name suggests these are account basic account services and have very less to no requirements for maintenance. Best suited for you if you only need an account transactional purpose.

Interest-Bearing Checking Accounts: If you are an someone who usually maintain a fairly large balance in your account than this is the account for you. Even though the interest given is not as large as provided by the savings account you will earn some interest on your account balance each month.

 

High-Yield Checking Accounts: As the name suggests these accounts maximize the earning potential of their account balance. However, these accounts do have some requirements like minimum balance and initial direct deposit.

 

Student Checking Accounts: As the name implies these are tailor made for students’ requirements as they provide benefits like no monthly fees associated, no minimum balance requirement and usually come with an overdraft protection. The reason for the popularity for these accounts is that they provide what is required for their target population.

Online-Only Checking Accounts:  As the name says online only accounts, these are accounts provided by banks operating exclusively online. These accounts have exceptionally efficient online and mobile banking capabilities. They make up for the lack of physical presence by providing low fees and high interest rates for their customers. Some of these accounts may provide interesting reward earning schemes as well.

Tips for selecting checking account

Selecting the checking will have an effect on your financial health and it will decide the course of your financial journey. As you will be frequently dealing with your checking accounts it should be convenient to use. It must align with your banking needs like how much you want to keep in the accounts, what rewards and features are you expecting. Now as you will be using the checking account for a relatively longer there should be ideally very less to no fees associated with the checking account and it should have a minimum balance requirement.

As you would be monthly transacting with this account it should have a robust security mechanism, an efficient identity theft protection. It must have desirable features like free checks, redeemable rewards, travel insurance. In this modern age it is not unfair to ask for an account which has efficient online banking and mobile banking system to give that ease of access. A well distributed network of physical branches and ATMs should also be a factor in your consideration because someone in your family may also need a checking account who is old and is not tech- savvy.

Your bank account must have a responsive and caring customer service which can support your needs on a 24/7 basis so that your financial queries would be resolved with the highest priority. Finally, it must have high ratings and has to be recommended financial institution.

If you are selecting your checking account provider carefully a major portion of financial worries is taken care. As this is the decision which will not only save you a great deal of money but will also open new horizons as most of the checking account providing financial institutions have investment services which can give you an edge in your journey towards your financial goal.

Investing means using your capital which can include time, effort, money etc. to work with the expectation of getting a larger payout in future. Investing is the most important step in the wealth creation as the entire outcome of an individual’s financial planning depends on effectiveness and efficiency of their investing behaviour and investing strategy. Retail banking products can be a good start for individuals who has little to no knowledge of finance domain. In this blog we will try to comprehend different types of investment products available and how you can start your investment journey.

The goal of investing can be either to grow wealth or achieving a financial goal, such as retirement savings, wealth preservation, or preparing for a major life event like marriage, buying a house or education. It is essential to invest early to take the benefit of your best friend which is compounding.

There are various retail banking products available with banks that can offer investment solutions to an individual based on their risk appetite, financial goals and their investing preferences. It once again converges to one’s ability to do research about various investment instruments and find out which is the best tools that will maximize the returns and will help in achieving financial goals with minimum risk.

Understanding the spectrum of retail investment products

Savings Accounts: This is the retail banking investment product that we all are familiar with. Savings accounts usually have very less to no minimum balance requirements and you can withdraw up to a certain limit very easily. The interest rates on savings are generally less than other investment tools but your money is not subjected to markets risks. They provide exceptional liquidity for any emergency needs and can prove to be a very good option for short- term financial goals.

Certificate of deposits (CDs): These are basically the time deposits provided by the banks in return for locking the customer’s money for a specific time. The interest rates are better than savings bank accounts however the liquidity of your money can be a concern as your amount will be locked for a fixed period of time, as there is a penalty involved if you want to withdraw your money before the maturity of your investment in this saving tool. The good news is that they are nearly risk free as the money invested is insured in case of closure of the financial institution. There are various strategies by which you can maximize the return of your investment in this tool and increase liquidity of your invested money. We will discuss these strategies in detail in later blogs.

Money Market Accounts (MMAs): Money market accounts are provided by various banks and credit unions which will help, like deposit accounts they are also insured. Money market accounts usually limit the number of withdraws, but it solely depends on the institution. These accounts also usually require a minimum balance requirement. They are better than savings accounts in both liquidity and earning potential as they offer check writing facilities. These accounts are best suited for the conservative investors seeking fairly decent returns and stability.

Mutual Funds: Mutual funds is an investment tool that will add your amount invested into a pool of capital along with other investors and that capital is used to purchase stocks, bonds or other securities. Investors are not be investing in the securities directly they are in fact buying shares in mutual funds. Mutual funds allow investors to create a diverse portfolio to mitigate risk and increase the possibility for greater profit margins. Fund managers of mutual funds handles the pool of capital accumulated in mutual funds as they have the expertise for financial analysis.

Annuities: Annuities offered by the banks can be an excellent tool if you are looking to get a fixed income after you retire. The money you have saved your working period can be invested in annuities and then can be received as a yearly pension for either your lifetime or for any fixed time that you have decided. Annuities can be majorly either fixed, variable, indexed, immediate or deferred, it solely depends your financial needs and your risk appetite which one you want to opt for your retirement. Investment in annuities is best suited for investors looking to get a steady income and protection against longevity risk after their retirement.

Stocks and Bonds: Retail banks provides the brokerage services to the customers which means that the banks will act as mere brokers in the trade of their stocks and bonds. Stocks means buying share of the company hence you are investing your money to grow with the success of a publicly traded company however investing in bonds means that you are investing in debt of a company which means that you are helping and organisation to raise money and they will pay you back once your bonds will mature along with the interest defined by them. Combining stocks and bonds in your portfolio can enable you to create a diverse portfolio which will help you in mitigating the risk and maximizing the profit for your investments.

Getting Started with Retail Banking Investment Products

2. Define your goals: Your financial goals must be clearly defined, which includes defining the amount that you want from your investment, deciding the time frame for achieving the amount that you have decided and quantifying risk by deciding when you will exit the investment if losses hit a predefined maximum value.
3. 2.  Know the investment landscape: Dedicate time to learn about the investment products, strategies, money markets, capital markets etc. Learn about shares, stocks, derivatives and do a comparative analysis about where you will get maximum value of your money at a minimal risk. Define your risk level and invest accordingly as it is your money only you are responsible for it.
4. Seek Professional Guidance:  Even if you have knowledge about the investment products and strategies, taking help or consulting a financial advisor will always give you an extra edge as you will always some extra knowledge about the current trends and future prospects.
5. Start small: Start your journey with the small investments by creating a diverse portfolio so that risk is mitigated. Once you are comfortable with the analysis and understand the market well only then increase the amount to be invested.
6. Monitor and Adjust: Create a system to monitor your investment portfolio periodically and analyse whether your investments are working in accordance with the goals defined if not then adjust them in accordance with your financial situation, market conditions and most importantly your financial goals.

Credit score in simple terms is what it is called a score just like a common test score which defines a student’s eligibility to take admission in a university. However, this score defines a person’s credit repaying ability and his worthiness to take credit. It is an indicator for risk assessment for lenders like banks, credit card providers, mortgage companies and financial institutions. It can be understood as a number which is responsible to create a perception about you among the lenders based on which the lenders will decide to either give you credit or not.

Credit score gives an estimation about the probability that an individual would be able to pay the debt based on the credit repaying history. It acts as an excellent indicator of the risk associated with providing credit for the lending companies. In United Kingdom there is no fixed standard scale however the credit score scale used by the Experian is mostly used which is ranged 0 to 899. Where 0 to 560 is very poor, 561-720 rated poor, 721-880 is rated fair, 881-960 is considered good and 961-999 is rated excellent score.

Factors on which Credit Score depends

A good credit score represents an individual’s worthiness to get credit and ability to manage and repay the debt responsibility. Maintaining a good credit score can hence increase the chances to get credit from any lender as the lenders see you as risk free credit seeker. The task of maintaining a credit score becomes if you actually what are the driving factors behind your credit score. 

Let us discuss these factors in detail and try to get a basic understanding of them:

Payment History: Your historical payment pattern is a dominating factor in evaluating your credit score. Less number of payment defaults for your previous debt means lesser risk involved for the lenders to give you credit again. If you have made payments on time in past for your debt no creditor will think twice to give you credit again as you would be having an amazing credit score.

Credit Utilisation ratio: It is just what it is called that is a ratio between how much credit you have used and how much credit is available to you. A very high credit ratio indicates that there might be a possible financial difficulty with the individual which in turn indicates a greater risk of default in repaying the credit. Most people think that shuffling credit between various credit cards can do the trick but it actually further lowers the credit score as the amount of credit taken out of total credit available will still be high. Credit utilisation percent below 30 is considered a good ratio for your credit score.

Length of Credit History: Lenders prefer accounts with a longer credit history because a longer credit history indicates better interest earning chances. No one is looking to lend you money if you are not generating money for them by paying them interest hence it is better to gradually paying off your debt. It is simple math a lender will earn more interest if you pay off the credit in a longer duration. So, the earning prospects are better in an account which has a longer credit history.

Credit Mix: Credit mix means mixing various kinds of credit for your financial needs like credit cards, loans, mortgages etc. But credit must be taken responsibly and refrain from creating accounts without any actual requirement for credit. A diverse credit mix indicates good credit management behaviour.

New credit Applications: It is an easy to miss factor but it is important factor as it indicates how frequently an individual needs credit and more frequent credit needs means poor finance management skills on a personal level. Also, every time you are applying for credit a hard inquiry is actually done from the credit bureaus which can reduce your credit score. That is the reason why we should always apply for credit when we actually need it.

Public records: Any negative public record on your name can considerably damage your credit score as it is quite obvious that no one would want to give credit to an individual who is having any negative record like bankruptcies, tax liens, foreclosures etc. Any such record will put you in a high default risk zone and will stay on your credit report for many years. It is a must to maintain a good public record.

Strategy to maintain a good credit score 

Effective analysis of the factors that affect your credit can help you in managing your credit score. All it takes careful monitoring and a consistency in payments. Let us discuss what you should do strategically to improve your credit score. You do not have to be a mathematician or a scientist and go through complex calculations to increase your credit score. You should understand that your credit score is actually a perception which is created by the numerical value among the lending institutions. So, all we have to do is work on the factors on which the credit score depends consistently and it will increase in time.

It is critically important to check your credit reports regularly so that you can find any irregularities in them. To increase your score, your reports should match with the transactions that you have taken or paid. Once you are done with the checking part you must make sure that you are making payments on time and are not missing even a single payment. Try to keep the credit utilization percentage below 30 percent as indicates healthy financial state. Keep old accounts active and avoid opening new accounts or applying for credit frequently. Try to distribute the credit in credit cards, loans and mortgages to generate a diverse credit mix. You should be consistent in doing all the things we have discussed and you will see with time your credit score will increase.

So be consistent and stay planned in order to increase your credit score.